In the context of replacing insurance policies, what does 'lapsed' mean?

In the context of replacing insurance policies, the term 'lapsed' refers to a situation where the policy is no longer in force due to non-payment of premiums or failure to meet other obligations as stipulated in the policy itself. When a policy lapses, it effectively terminates without any value, meaning that the insured no longer has coverage and cannot claim any benefits under that policy. This termination implies that the insurance company is no longer responsible for any claims or obligations tied to that specific policy.

The importance of understanding a lapsed policy arises particularly in replacement situations, as a lapsed policy may lead individuals to seek new coverage, potentially exposing them to greater risks without insurance protection in the interim. Recognizing that the lapsed status indicates a complete termination without value helps policyholders to make more informed decisions when considering new insurance options.